FBNH’s FX Earnings and Dividends Per Share Expected to Rise in FY 2023

Though FX shortage has adversely affected the foreign exchange positions of most banks including FBN Holdings in the last few years , analysts expect it to pick up in 2023.. The Financial Holdco’s foreign exchange income stumbled from N32.92bn in 2018 to N1.46bn in FY 2020. Lower FX transactions due to stringent FX application requirements have encouraged customers to pivot towards the parallel market, thereby hurting banks’ FX income. Nevertheless, FBNH’s foreign exchange income has recently improved but remains below its 2018 income, as FX income for 2022 settled at N22.39bn. Analysts believe that exchange rate unification should improve the size and number of official FX transactions for banks as the CBN recently revised the daily transaction limit to US$10,000. Market intelligence indicates that FBNH has traded over N200bn worth of FX since the policy implementation, indicating a larger FX income for 2023. The rise in income would reverse the -47.35% drop recorded in Q1 2023. The positive adjustment should increase gross earnings, thereby potentially improving dividend payout. The Holdco’s dividend payout ratio fell from 19% in 2019 to 13% in 2022. Analysts see the group’s gross earnings rising to between N925.90bn and N1trn, pushing earnings per share and dividend per share to N4.44k (up from N3.74K in 2022) and N0.65k (up from N0.50k), respectively, in FY 2023. The Holdco’s recent price of N19.35k implies a forward p/e of 4.35X or a few basis points below the industry average of 5X. Though